Articles Posted in Business Transactions

Businesses are moving away from the traditional storefront and are instead setting up shop online. Both the internet and apps connect individuals across the globe, providing businesses with greater and more innovative ways to reach new customers. For example, on Black Friday 2016, the busiest shopping day of the year for most retailers, online sales rose 21% year-over-year for a total of $3.34 billion. A full one-third of that figure was just from mobile sales.  On Cyber Monday 2016, the largest online shopping day, online sales rose over $3 billion with 26% of sales just from mobile devices.

As a greater number of businesses devote their focus to the development of an online presence and using e-commerce to conduct their business, businesses must pay more attention to properly establishing and operating their online business.

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Applying for a patent can be complex and time-consuming. People who aren’t familiar with the process can run into hurdles that lead to delays and higher costs.

If you’re thinking about applying for a patent, here are a few important questions to consider. Keep in mind, this is a high-level overview and shouldn’t be construed as legal advice.  If you are looking for advice, please call us at 408-441-7500 today.

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What happens to an LLC member’s membership interest in the LLC if the member files bankruptcy? How does the member’s (the debtor) bankruptcy filing impact the LLC and its other members? Does the bankruptcy trustee (or the debtor in possession in a chapter 11) step into the debtor’s shoes contrary to an express provision in the LLC’s operating agreement restricting transfers by members and prohibiting a transferee or assignee of a member from becoming an LLC member without the other members’ consent? Is the bankruptcy trustee bound by the terms of the LLC’s operating agreement, or does the trustee acquire the debtor’s membership interest free and clear of any transfer or other restrictions imposed by the LLC’s operating agreement? To answer these questions, the Bankruptcy Court in the debtor’s bankruptcy must first determine whether the LLC’s operating agreement is an “executory” contract under Section 365 of the Bankruptcy Code.

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The Bankruptcy Code does not define “executory contract.” However, many circuits, including the Ninth, have adopted the “Countryman Test,” which provides that a contract is executory if ‘the obligations of both parties are so far unperformed that the failure of either party to complete performance would constitute a material breach and thus excuse the performance of the other.’ Determining whether a contract, including an operating agreement, is executory therefore requires a case-specific examination of the contract in question.

Going to court is expensive and can take your focus away from running your business for a significant period of time. In order to avoid the added cost and stress of litigation whenever possible, include these steps in your business practices.

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Every business relationship should be memorialized in a written contract. This includes between owners, with clients and customers, with employees, with vendors, and more. Having a contract that is properly drafted to best govern the specific relationship and responsibilities at hand can help avoid disagreements down the road. Each party will know his or her obligations and expectations because it is in writing and the contract can help dictate how disputes will be resolved out of court.

The United States Department of Labor recently announced a new rule on white collar overtime exemption regulations. This new rule will affect an estimated 4.2 million white collar workers who will no longer be exempt from Fair Standards Labor Act guidelines and must be paid for overtime work. The new rule will go into effect on December 1, 2016. The employment lawyers at Structure Law Group, LLP are experienced in ensuring that their clients follow all federal and California employment rules and regulations.

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Previously, qualifying employees with an annual salary of more than $23,660 (or $455 per week) were generally exempt from the federal requirement that employees are entitled to overtime if they work over forty hours in one week. Under the new law, the minimum salary threshold for exemption has been raised to $47,476 annually, or $913 per week. This amount will be automatically revised every three years by a formula that takes into account wages across the country.

Owners of businesses with at least one employee should stay fully apprised of all federal and California state laws that relate to the treatment of employees. For example, there are various state and federal laws related to wage and hour matters, discrimination, and insurance and taxes. Laws can change and courts regularly issue new interpretations of existing laws.  Accordingly, it can be difficult for you to know whether you are truly in compliance with the most up-to-the-minute versions of employment laws. After all, your focus is on your business and not the latest court opinions. However, a skilled business attorney makes it their job to know new developments in any laws that would be applicable to your business and your employees.

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California Court Ruling on Employee Seating Requirements

Earlier this year, the California Supreme Court issued a decision on a class action case that involved an employer who forced its employees to stand during their work and subjected those employees to potential discipline for sitting down. This discipline occurred even though their job duties did not require standing. Even if some employees were not actually prohibited from sitting down during work hours, they were not provided with chairs, stools, or adequate seating by their employer. While employee seating may not seem like a hot-button issue to you, it is important to many employees who experience foot pain, back pain, or other ailments from standing for long hours unnecessarily.

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The State of California protects consumers of retail goods by limiting warranty disclaimers on products sold in the state. California’s warranty protection extends to manufacturers, distributors, and retailers alike.  The warranties apply to both the sale and lease of consumer goods. The seller can disclaim the warranties by following very specific and highly detailed statutory requirements. Failing which, the seller cannot disclaim the warranties implied in every consumer sale. The sale of a service contract at the time of or within 90 days of the sale of the goods adds another aspect to the seller’s ability to protect themselves after the sale. San Jose’s preeminent business attorneys at Structure Law Group, LLP possess a high level of experience and skill drafting warranty disclaimers for businesses.

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The implied warranty of merchantability protects consumers in every sale of goods in California. Specifically, the implied warranty of merchantability extends to the retailer, distributor, and manufacturer of goods. The retailer is indemnified by the manufacturer for the full amount of liability. Merchantable goods must either conform to the contract description or be of acceptable quality in the trade or business. In addition, the goods must be fit for their ordinary use, rather than for a specific purpose. The goods must also be identified, labeled and packaged appropriately. Lastly, the goods must conform to the promises made on the label or packaging. Goods are non-conforming if the goods fail to satisfy any one of the necessary requirements set forth above.

A second implied warranty arises in specific circumstances. This warranty is the implied warranty of fitness for a particular purpose.  The warranty of fitness for a particular purpose attaches to the sale of goods when the retailer, distributor or manufacturer knows or has reason to know that the consumer is relying on the goods to perform a very specific purpose. Additionally, the buyer is relying on the seller’s expertise and advice that the goods purchased are sufficient to satisfy the particular purpose.  Additionally, the seller must know or have reason to know that the buyer is relying on the seller’s expertise and judgment. The goods must conform to the seller’s expectations, i.e. the particular reason the consumer purchased the goods.

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Corporate officers, partners in a partnership, and members of a limited liability company owe a fiduciary duty to the principal, i.e., the business entity, to act in the best interest of the organization. Failure to act in the principal’s best interest or actively competing against the principal to which a fiduciary duty is owed exposes the fiduciary, the agent of the principal, to civil liability. Care must be taken by the fiduciary not to compete against the organization to which they owe their duty of loyalty. The Silicon Valley Business Attorneys’s at Structure Law Group, LLP are highly experienced in preventing and resolving corporate disputes that may arise from a breach of fiduciary duty.

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The foundational tenet of agency law is the duty of loyalty owed by the agent, or fiduciary, to the principal or business entity. The duty of loyalty obligates the fiduciary to act in the best interests of the principal. The duty of loyalty extends to “all matters connected with the fiduciary relationship.”  Thus, the duty of loyalty prohibits fiduciaries from obtaining a benefit from others as a result of the fiduciary relationship. This prohibition extends to all dealings in which the fiduciary is involved on behalf of the principal. The duty to act with loyalty is not limited to financial matters.

The fiduciary’s duty of loyalty encompasses situations involving parties adverse to the principal. The fiduciary has an absolute duty not to act on behalf of a third party whose interests are adverse to those of the principal.  The fiduciary is duty-bound not to compete, either personally or on behalf of, another entity. The agent’s obligations last for the entire duration, and in some instances depending on contract language, last beyond the termination of the fiduciary’s relationship with the principal. However, agency law does provide for the fiduciary to plan and prepare to leave the principal, even to then compete with the principal.  Notwithstanding, the action taken by the fiduciary must not violate any other duty owed to the principal.

California’s Worker Adjustment and Retraining Notification Act, “WARN” for short, obligates employers of 75 or more employees to follow certain procedures when downsizing the workforce.   The WARN Act does not apply to a few layoffs. Rather, the WARN Act applies to what is known as a “mass layoff,” in which the business lays off 50 or more employees during a 30-day period.  Businesses considering downsizing their workforce must be wary of the consequences of failing to comply with the WARN Act. Failure could cost the employer a significant amount of money in back pay and other compensation. Consulting with an experienced Silicon Valley Employment Lawyer at Structure Law Group, LLP will help you avoid the pitfalls associated with downsizing your workforce.

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Owners of “covered establishments,” that is, businesses employing 75 or more employees in a 12-month period, must give proper notice of a mass layoff. The employer must give notice to its employees 60 days in advance of the layoff order. “Layoff” means cessation of employment because of insufficient money or an insufficient amount of work. The term “layoff” does not apply to seasonal employment or employees in certain industries including logging and motion pictures. The WARN Act also applies to mass relocations and when an employer’s business closes down. To qualify for the WARN Act’s protection, an employee must be employed by the company for 6 of the preceding 12 months.

In addition to giving notice to the affected employees, the employer must also give written notice to several state and local agencies.  These notices must include the following:

Public policy in California dictates that businesses should be free to compete against each other in the marketplace. Competition among businesses greatly benefits consumers. At the same time, competition engenders higher quality goods and higher service quality at price points advantageous to the consumer. Toward that end, California’s antitrust law, known as the “Cartwright Act,” prohibits a wide variety of conduct designed to restrain competition in the marketplace.

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The San Jose business lawyers at Structure Law Group, LLP dedicate their practice to helping business owners grow their company while insulating them from harm.  Unfair competition has a negative effect on consumers and businesses. Business entities should avoid structuring agreements which arguably cause unfair competition. Failure to do so could subject those businesses to lengthy and costly litigation and expose them to potential damages.

According to California business, trusts are unlawful and against public policy. California law defines a trust as a “combination of capital, skills, or acts by two or more persons” to: